I recently wrote about a client for whom we were able to produce a 70 point reduction in Experience Modification Factor, also known as EMR, X-Mod, or just Mod. I thought I would expand a little bit on that, though, as it is a situation that I think will apply to other employers in similar circumstances.
This client was a California based company, which means their X-Mod was calculated by WCIRB, the California-only rating bureau (as opposed to NCCI, which handles most of the rest of the country.)
WCIRB has a special rule for when insurers can't complete the Workers Comp audit. This rule says insurance companies must then report whatever the claims were for that un-audited policy for use on the X-Mod, but no payroll at all. This clearly has a powerful upward impact on the Mod calculation.
That's what happened to this client. They didn't cooperate fast enough on the audit, so they got clobbered on their X-Mod. But the thing is, this client did subsequently cooperate with the audit. And in that case, the insurance company should have filed a corrected report with WCIRB.
And they overlooked that little detail. So the client's X-Mod continued to have that horrible penalty built into it, for several years, because the insurer failed to filed the corrected unit statistical report.
We got it fixed for this client. But methinks they can't have been the only client to whom this has happened.
And just this year, NCCI got approval to incorporate a somewhat similar rule for experience mods calculated in NCCI jurisdictions. The NCCI rule doesn't work the same as the WCIRB rule, but it will produce similar penalties in mods when audits aren't done fast enough to suit insurers, and those audits will need correction via corrected unit statistical reports.
Based on what we've learned in recent years consulting on a class action lawsuit, some insurance companies are incredibly lax about filing corrected unit statistical reports. So I very much expect that, in a couple of years, NCCI mods will also start having occasional big errors due to some insurers not filing these corrected reports.
We shall see.